Julie Christine C. Tenazas Corporate Planning Officer Corporate Planning Department

1. The Global and Philippine Economy, the Microfinance Industry and PCFC, and Proposed Planning Framework Julie Christine C. Tenazas Corporate Planning Officer Corporate Planning Department

2. The Global Crisis • National Indicators • Graphs/Data and Interpretations • Microfinance Implications • Planning Framework • Environment Scan • SWOT Analysis • Initial Recommendations Outline

3. Possibly the “worst crisis since the Great Depression” • Housing bubble in the USA led to the “Credit Crunch” • Crunch has increased the risk of global recession • Actually a crisis of confidence • Fortunately, Philippines still has relatively less exposure than other countries The Global Crisis

4. National Indicators

5. National Indicators

6. National Indicators

7. National Indicators

8. National Indicators

9. National Indicators

10. National Indicators

11. National Indicators

12. National Indicators

13. National Indicators

14. National Indicators

15. National Indicators

16. National Indicators

17. National Indicators

18. National Indicators

19. National Indicators

20. Environment Scan SWOT PCFC Planning Framework Planning Framework

21. Environment Scan

22. PGMA’s directive to reduce microfinance interest rates (-/+) • Funding agencies preference to lend directly to MFIs (-) • Fiscal rationalization or non-prioritization of GOCCs in government budget (-) • Restrictive Commission on Audit (COA) “one-size-fits-all” directives (-) • Governments around the world are putting efforts in microfinance (+/-) Political Factors

23. High borrowing rates (-) • Capacity of other wholesale lending institutions to reduce interest rates to MFIs(-) • High inflation rate (-) • High poverty incidence; great demand for microfinance loans (+) Economic Factors

24. Increasing number of commercial banks interested in microfinance (+/-) • Acceptability of existing microfinance products & services to the poor (+) • High need for a range of additional responsive microfinance products (+) • High need for capability building of MFIs and end-borrowers (+) • Preference of end-borrowers for sari-sari stores as microenterprise (-) • Diversion of microfinance loans to non-earning expenditures (-) Social Factors

25. Rapid advancements in technology (+) • Increasing affordability of technology (+) Technological Factors

26. SWOT Analysis

27. Image • Very good credit standing with funding agencies • Good company image and reputation • Good financial and operational performance Strengths

28. Company Operations • Linkages • Strong and long-term business relationship with MFIs • Conduct of social mobilization and end-borrower education • Performance and Internal Processes • In the early stage of product development/ enhancement • Human Resources Development • Experience and expertise of Account Management Group in wholesale lending operations • Competence and skills of PCFC staff • Technology • Relatively updated in technology • With sufficient budget for technological advancements Strengths

29. Political Capabilities • Lack of charter and sovereign guarantee • Restricted by political impediments (inadequate government equity) • Resources • Inadequate plan to raise funds • Limited capacity to compete with the lowered interest rates of other wholesalers Weaknesses

30. Company Operations • Linkages • Weakening business relationship with MFIs • Performance and Internal Processes • Decreasing loan portfolio due to non-maximized availments • Seemingly outdated lending policies, products and services • Deteriorating portfolio quality of MFIs • Lack of standardized policy on putting-up valuation reserves and a clearly defined unit-in-charge to implement the policy • Failure to come up with clear agreements and alignment of KRA of units to corporate plans and targets Weaknesses

31. Company Operations • Performance and Internal Processes (cont.) • Lack of a comprehensive manual of operations • Lack of product development/enhancement • Overloading in some units; lack of manpower to accomplish all tasks within the required response time • Human Resources Development • Limited effort to be vigilant of early warning signals of MFIs’ declining performance; to regularly review and classify loans; to provide adequate provision of valuation reserves; and to fully disclose the status of accounts • Un-updated skills in account delinquency management • Lack of full cooperation from staff Weaknesses

32. Great demand for microfinance loans • Increasing number of commercial banks interested in providing MF loans • Acceptability of MF products and services to the poor • Borrowers’ need for a range of additional responsive MF products and services • MFIs and end-borrowers’ need for capability-building • Rapid advancements in technology • Increasing affordability of technology Opportunities

33. PGMA’s directive to reduce microfinance interest rates • Funding agencies preference to lend directly to MFIs • Fiscal rationalization or non-prioritization of GOCCs in government budget • Restrictive COA directives • High borrowing rates • Capacity of other wholesale lending institutions to reduce interest rates to MFIs Threats

34. High inflation rate • Preference for sari-sari stores as the microenterprise of most end-borrowers • Diversion of MF loans to non-earning expenditures Threats

35. Analytical Framework

36. For Business Relationships • Improve business relations and revive/energize the partners’ trust and confidence in PCFC. • Conduct re-orientation on policies/ guidelines to refresh/increase awareness of their existence by all concerned especially in matters concerning customer service and satisfaction. • For Outdated Lending Policies and Products • Review existing policies on interest, accreditation criteria and work at being more flexible without sacrificing quality. • Review existing products and services and come up with recommendations for enhancement. • Develop new services and innovations that will give PCFC an edge among its competitors. • Study the business models of other wholesalers and its applicability to PCFC. Initial recommendations

37. For Deteriorating Portfolio Quality • Review and update account classification. Put more effort at maintaining and maximizing loan utilization of active MFIs. • Be alert of early warning signals. Regular loan classification and provisioning should be done and reported to management. • Capability development will be geared more to the active accounts without unduly neglecting the required activities by accounts for rehabilitation. • For Human Resources Development • Invest in continuous staff skills and attitude development focused on resolving concerns in account delinquency, lack of cooperation/teamwork, and product development/enhancement. Initial recommendations

38. For Internal Processes • Crop up a standardized policy on classification of loans and provision of valuation reserves. • Develop and agree on a strategic plan using appropriate frameworks, carefully aligning KRAs of all units, setting bases for regular monitoring and feedback, and obtaining the commitment of every unit to the plan. • Develop a comprehensive manual of operations based on agreed KRAs; update manual as soon as issues and resolutions arise; and disseminate information. • Based on KRAs and work volume analysis, allocate appropriate number of personnel with capabilities required for the tasks. Initial recommendations

39. For Fund-Raising • Set up a comprehensive plan to raise funds. • For Competition • Make a comparative presentation and analysis using MFPC data on how PCFC stand against other GFIs/GOCCs. • Explore providing in-house MF capability-building activities (trainings and consultancies) to MFIs and end-borrowers. • For Personnel Incentives • Speed up approval and implementation of proposed incentive scheme. Initial recommendations

40. Thank you